want to buy a fur coat. i will buy four. >> i am going to buy 20 of your apps. even though i only need one. we have to go. andy, go away. jeddidiah, you suck. terry, see you later. i'm greg, bye-bye. p?lv

>> shannon: before the battle over president obama's budget begins in earnest there is

something else to take care of. a chief correspondent reports on paying the bills right now. >> reporter: there is something far more pressing for the budget next fiscal year that begins in october. it's the lack of a budget for year and republicans want to cut now and not later. >> we are not waiting for the next year. we are doing it now. we'll be on the floor cutting more than a hundred billion dollars. >> reporter: the government and agencies are operating on what they are calling a continuing resolution that authorizes them to spend at current levels. five months in the budget year they can't take back money already being spent making the cuts difficult. the cuts are sweeping and painful. >> when we do our budget analysis, it should be done with a scapel, like a surgeon would approach it, not with meat axe. >> that spending educates our children, promotes our health

and commerce and building the economy. >> democrats raled argued they are job killers but differ on the numbers. >> we estimate it will cut about 800,000 jobs, both public and private. >> a full $100 billion cut to discretionary spending would likely result in job losses on the order of 994,000. >> but house speaker points out from a letter from 150 economists that reducing spending helped job creation. >> you can't spend money you don't have. massive debts lead to massive tax increases. massive tax increases lead to no jobs. >> speaker boehner identified one area of jobs he thinks should be cut. >> since president obama has taken office federal government has added 200,000 new federal jobs. if some of those jobs are lost in this, so be it.

we're broke. >> there was disagreement over details. democrats argue that it would cut housing for homeless veterans but they say it's not true. >> there are 30,000 vouchers available today. only 19,000 have been used. there are 11,000 vouchers waiting. >> reporter: the debate over every nook and cranny of federal spending will take another two days in part because unlike the last congress, anyone is allowed to propose an amendment and some 400 have been offered the speaker says the house is in uncharted waters and he is ready for whatever. >> shannon: amid all the negative economic news, the story of an amazing recovery. laura ingle reports of a business that rose up out of ashes. >> we see the remnants which is

nothing. >> the fire that consumed the nation's oldest and largest forge ripped through with scorching intensity leaving the factory and retail store in ruins and jobs in question. >> it's been there for 30 years. >> i was horrified. it was one of those times when you say, what am i going to do tomorrow? >> they have been producing by hand metal heirlooms at the forge since 1923. last year's fire might have been the end but the company got back on its feet and nearly added 40 employees in the process. >> literally since the fire the amazing things that have happened to our little company are miraculous. >> the week of the fire, insurance adjusters they should expect to be out of business for nine months but with tremendous support from the community they were back in business within

five days. >> you saw the love of this community and i saw the love of each of our employees demonstrated in that fire in ways that you can't explain. >> reporter: with a workshop rented at a good price. they turned out the largest order in history within weeks of the blaze, from pittsburgh penguins for 20,000 commemorative items. owners of a outlet stepped up offering retail space. >> we put our situation ourselves and we knead for wendall august and they had to be open to stay in business. >> it shows when we are down, when something bad happens, americans rise up and we help each other. >>. >> shannon: president obama awarded the nation's highest

civilian honor to 15 people. among the group receiving the medal of freedom, former p.george h.w. bush and warren buffett and congressman john louis and bill russell and baseball's stan the man musial. >> capitalism goes where it hasn't been before. and up next, t

number's up. and some of

these kids,

pakistan is supposed to be an american ally. it get billions in u.s. aid. think report that pakistan is not acting like a friend in one politically sensitive case. >> reporter: protestors crowded streets calling the death by

hanging of an american counselor raymond davis. last month davis opened fire and killed two motorists. he says it was an act of self-dst but police are calling it cold-blooded murder. he is being held in prison how a cell phone video was released that reportedly show him a arguing with his captures. >> now the street shooting has grown into an international showdown between the u.s. and pakistan between high level meetings and threats are abounding. >> so a relationship which all agrees is important is now mired in frustration, anger and bitterness. >> president obama may have upped the stakes today suggesting that pakistan's is a

violation of diplomatic law. >> if our diplomats are in another country and they are not subject to that country's local prosecution. >> senator john kerry arrived in pakistan late today seeking his release. >> my hope is we can find away together without politics, without getting into ideology or other things. >> reporter: he is not the only washington figure monitoring this crisis. hillary clinton has announced that mark grossman will assume the role as special envoy. he will have his hands full. they are facing pressure not just from the u.s. but from the polar opposite the taliban who as threatened to punish with death to anybody that helps his release.

>> u.s. customs enforcement say two agents have been shot in mexico. the agents were driving between mexico city and monterey when they were attacked by unknown assail nts. there is no word on their condition. >> back here at home. there are new questions about the f.b.i.'s investigation of deadly anthrax attacks ten years ago. >> reporter: this is the worst bioterrorist attack that killed five americans and shut down capitol hill. while the evidence points an army insider is guilty but the case that was officially closed last year rested on the conclusion that the anthrax ka crime from a bio research facility. we learned that the powder was not identical and neither grown in two separate batches and the scientists said the department of justice overstated its case. >> the scientific link between the letter material and the

flask number 1029 is not as conclusive as dated in the doj summary. >> reporter: the f.b.i. has long maintained, it was the totality of the investigative process that determined the outcome of the case. but it was not enough for a leading republican. they say the national academy science report released today that the science is not necessarily a slam-dunk. there are no excuses for an independent review on how the f.b.i. handled the investigation in the anthrax case. the scientific evidence was part of the case against researcher group advance. he killed himself with an overdose of tylenol as he became a primary subject to the case. many asked why he chose to kill himself with such a slow and painful death.

>> shannon: government lawyers defended their efforts how classified documents ended up on the wikileaks website. they are fighting a judge's order demanding information about their twitter accounts. the action does not involve julian assange or the soldier suspected of leaking those documents. they have rejected an effort for tsa workers to get union rights and misusing body scan images punishable by a year in prison and a fine up to $100,000. >> details next on the grapevine and another complaint that nancy pelosi is sore loser.

>> shannon: fresh pickings from the klilt grapevine. carney made big bucks after he worked in the obama position. as bureau chief, he left in 2008 to work on vice president biden's team. political reports shows he was paid $58,000 bonus in 2009 after he left time as well as a surveillance payment. they say the buyout not done for any work in 2009. a republican operative says its double standard, quote, if anyone in the gop got $200,000

from an employer that we were going to work for the president they would crucify us. >> another moderate democrat is complaining about being ignored by nancy pelosi. dennis cardoza tells role call, there are a lot of us that feel alienated. blue dogs and moderates don't feel they are reached out at all. the comments after north carolina's schuller last week. she is working with all members of the caulk us. >> and it appears north korea's leader kim jong-il is cutting back. he usually hands out cars and watches in an attempt to get loyalty. but he has to buy knock-offs from china. he celebrates his 69 birthday on wednesday. >> the law prohibits welfare

cards from used at casinos and race tra tracks and other stores. >> one small business at a time is change in cuba. there is an american import in a communist nation. >> up and down havana's streets, signs of free mark capitalism are blossoming and it's all entirely legal in a country which for 50 years has condemned the evils of capitalism. since september. 75,000 cubans have become entrepreneurs. some turn their homes or restaurants, others barber shops and scooter repair businesses. just some of the 178 activities now in the country. >> it was cuban socialism for many years. >> they say part of this change is shear necessity. cash strapped government is laying off half a million

workers as it sheds millions of dollars from the payroll. >> the government can't afford to pay for all the people that are on the government payroll will it doesn't want them to crash so it allows them make money in private businesses. >> but the care on the of capitalism is frustrating in a poor country where supplies are far from abundant and inventories are minimal. >> as time goes by i am getting more customers. sometimes i make about thousand pesos a day, sometimes you don't find good products and can't offer good deals. >> the black market has been tolerated for years another theory to explain the economic experiment by legalizing the activities the state can tax them bringing in needed revenue and remain in control and communist. >> shannon: former president bill clinton is in haiti today. he met with two presidential

candidates to discuss the future of reconstruction efforts. he is special envoy to haiti and coaches the reconstruction commission. >> silvio berlusconi will stand trial on prostitution and abusive power charges. a judge ordered the proceeding to begin april 6. he is accused of having sex with an underage girl and then using his power to cover it up. he denies the charges. >> president obama talks to reporters and nation about issues.

>> shannon: fox news alert. senate has passed a 90-day extension of expiring provisions of the patriot act. those particular provisions shall scheduled to end february 28 and they are extended to may 27. the legislation will have to go to the house which you remember yesterday passed a similar

version a little bit longer extension. >> all right. back to our top story. budget and president selling it. take a listen. >> what my budget does is to put forward some tough choices, some significant spending cuts but at the same time we are going to make key investments like education and science and technology, research and development. >> instead of confronting our debt head on, he has presented us with a budget that spends too much, borrows too much and taxes too much and that costs jobs and opportunities. >> shannon: all right. let's bring the panel. steve hayes, writer for the wreakly standard and charles krauthammer, welcome to you all. didn't start with a lot of common ground. he talked about the fact they are going to have conversations and meet in the middle, not there yet? >> no. i think it's interesting to put

out a politically cautious blueprint and kind of refuse to cut deeply. release such what is going on in the house this week which is spending bill for the remaining seven months of fiscal 2011. president obama has a budget for 2012, but when they try to get this impasse we're coming for march 4th it could bleed into the debate on whether to raise the debt ceiling. the president has gotten the parties further apart than a week ago and increasing the likelihood of a shutdown. you can make the argument that if he came out and tried to propose entitlement reforms i don't see what would be wrong with him doing it first. >> shannon: and constant accusations from republicans in

one of difficult areas, he was asked about that and here is his response positive put things off. >> the first step is to make sure we are stabilizing the current situation and second step to fake on the long term drivers. >> shannon: and asked about the long term drivers. gop issued a statement, talking about entitlements, one issue that has been off-limits here in washington. our budget will lead to where the president high school paled and include real entitlement reforms so we can have a conversation with the american people about the challenges we face and the need to chart a path to prosperity. we hope leaders will demonstrate leadership and join us in working to responsible solutions to confront the economic challenges before us. steve, did they find common ground on entitlements? >> no. that what you read is news of

the day. he didn't pledge to do anything about serious about them. we had a republican statement that came from the leadership and paul ryan was a commitment to include in the budget that paul ryan is going to be presenting in early april some attempts to deal with entitlement spending. this has been a behind the scenes fight in the republican caucus. the people who want to have serious entitlement reform have won the debate. so you now have republicans committed to putting out a budget that reflects the long term fiscal crisis of the country. the reason this happened i think is because in this debate over the continuing resolution you have house freshmen, republicans tea party types speak up and say we have pledged originally and we ran on commitment to cut $100 billion in non-security discretionary spending. despite the fact there was time shift and leadership wanted to

cut back, we need to meet that number. what that said to leadership was these freshmen and conservatives have real power. they can tell us what we can and cannot do and leadership wisely decided we're going to take this fight to the white house on entitlements. an opening that came about because the president totally punted on it. >> shannon: how much of a game changer is the talk about entitlements. steve mentioned the friction, that the freshmen are really calling some of the shots for some of the decisions? >> it looks as if the president decided the republicans are going to go ahead and do this and take the risk and be responsible, it looks as if he is going to be opportunistic as he can. the fact that he proposed nothing on this is quite astonishing. a week before his inauguration he talked to "the washington

post" and he said we can't postpone entitlements and then he goes ahead the first two years of the presidency he ignores it under the excuse, the argument he made, it's emergency a catastrophe we're about to head over a cliff so i'm going have to spend trillions of dollars in deficit spending as a temporary emergency measure. afterwards we'll do entitlements. now is afterwards. this was his state of the union address. this was the budget which is the afterwards. it's after the commission -- he himself had asked to make recommendations. he came in with nothing. that to me means he is going to cynically run for the next two years against the proposals that republicans are going to make because it's a risk. everybody understands it and it be interesting to see who political cal calculation is better one is american serious

about debt reduction, will they reward the republicans for courage or reward the democrats for cynicism and protecting every single program zbloornt. >> shannon: he did have a point commission on the debt commission, why he didn't include more of their recommendations. especially he had the support of senator tom coburn, interesting response from him. >> he said he agreed with some of the recommendations but not all of them. interestingly the senator, very conservative republican, said yesterday if the president were to embrace the commission's recommendations and endorse it, he would own it and he would put the republicans on the spot and potentially become a great president in being that bold. then today, it's really not about that. he says i was glad to see republican leaders how come you didn't talk about entitlements, i think that is progress. it really is a game and he

admitted it was. >> he said and press conference was full of inconsistencies but he said we need to have a moment where we set set aside poll fix and bring democrats and republicans together in a non-partisan way. a reporter spoke up, isn't that what your deficit commission all about? he struggled to answer because frankly there is no answer to the question. >> the answer is, he has to run. as a demagogue, it's been easy. everybody has prepared social security and medicare has gotten it and is it going to be different right now. >> next up, pakistan, should the u.s. continued to support pakistan's government. vote on our poll. vote on our poll. we want to hear from you,

i got an egg [pop] i got gum a kazoo a candy necklace i got one of these [pop] a stamp helium fabric softener ear plugs [pop] lipstick two pills a day is what it takes to stay alive if you're hiv positive. those pills cost about forty cents a day.

>> shannon: before the break, should the u.s. support pakistan's government. here the results. 23% have responded, yes so far. 76% say no. thank you very much for voting in our question tonight. back with the panel and we're going to talk about current structure with pakistan that an employee raymond davis is being held after being accused of murdering two pakistani men. here is what the president said about the situation today. >> we've got a simple principle here, that every country in the world that is party to the vienna convention on diplomatic relations has been upheld in the past and should uphold in the

future. if our diplomats are in another country and they are not subject to that country's local prosecution. >> shannon: yet raymond davis is still being held there. how has the administration handled it so far? >> i like what the president said. we have to be stern about this. in foreign affairs, some things are complicated and others are not and ts isn't. anybody holding a diplomatic passport has to be untouchable. we learned our lesson in the iranian hostage crisis 30 years that deeply harmed american deterrence and respect for america around the world. this is an example we cannot tolerate and has to put in question our relations with pakistan. if they insist on playing on are stirring up anti-american sentiment using this case and other cases as well, we have to really what henry kissinger

called an agonizing reappraisal of our relationship because we are spending huge amounts of treasure and blood for a government that works against us in many ways. this is india's influence. it is a rising world power. it worries about pakistan as much as we do and i wonder if it's the time about thinking turning over the agenda or their responsibility of thinking about turning it over to india. that would get the attention of the pakistanis but not a direct takeover. this is an area where we are heavily invested. pakistan is not a reliable ally. afghanistan is a difficult area for this. this is your area of the world. help us in some way. >> shannon: no question this impacting the relationship. bruce redel in how we are seeing

it play out. >> the impact of this affair is very clear. we have already suspended one meeting of the tri lateral u.s. pakistan engagement policy. the visit of pakistani president sudari to washington next month is said to be in jeopardy and the promised visit of president obama to pakistan in 2011 is also now in jeopardy. >> shannon: and there is also the question about the billions in aid that we spend to pakistan? >> we do because the afghanistan problem is our pakistan problem which is why i don't know how we can really threaten and cajole senator kerry will go over and pressure them to release mr. davis and remind them of the importance of our strategic alliance. its relationship that is deteriorating. it is a weak settlement. they are providing safe haven

for the taliban. this is arrest and capture and imprisonment. no matter what the conversation is about aid, this is all about what is on afghanistan, without pakistan i don't know how we can succeed in afghanistan. >> shannon: what do we do that we have taliban leaders, a group linked to al-qaeda. they are threatening if you give raymond davis back to the u.s. you are going pay the price? >> i don't think they need that encouragement to make them doing what they are doing. it's important to note that local officials had leaked the police tape to the pakistan news media to inflame the situation. you have a country where it doesn't take much to inflame the situation. remember the quran situation and i agree with the policy implications about the united

states with charles. you can't set a precedent you take this lightly or negotiate in some public way. you have to take a hard line, this is unacceptable and this is violation of international law and we will hold you accountable. >> shannon: does senator kerry make a difference? >> if you want to have a polite face for, in but the bottom line is release him now or cut off of aid. a cut of contacts and visits it's going to be a severe price and in the end we may cut you off entirely and leave you on your own. this has to be an issue where there is no compromise hoops. >> what kind of time line do you see? >> a few days. there has to be a response. they can't hold on to this guy. the idea that officials inside that leaked this and made it an issue tells you how hostile the attitude towards the united states inside of what is at

least reputed to be an american ally. >> shannon: all right. thank you very much. that is it for the panel. stay tuned, a lot of speculation about the political future of former florida governor jeb bush. that is next.